In the civilised world, many civilised nations have entered into mutual agreements to prevent “double taxation” because it was considered inhuman and unjust to tax individuals twice i.e. in both the country from which they are earning their income (tax domicile) and in the country in which they reside. To make this more stringently clear, most of such agreements are also being termed as “avoidance of double taxation agreements” i.e. to avoid double taxation.
However, our illegitimate government, elected by a very marginal majority by electoral corruption, entered into an agreement with the Great Socialist People’s Libyan Arab Jamahiriya led by Colonel Gaddafi (whom the United Nations declared a dictator) by which, after several amendments, rendered this agreement to mean practically the opposite to what it was originally intended, and literally a “double taxation agreement” i.e. to be taxed at both contracting country and the residency country.
This has been announced by L.N. 328 of 2010, Income Tax Act (CAP. 123) Double Taxation Relief (Taxes on Income) (The Great Socialist People’s Libyan Arab Jamahiriya) Order, 2010. In a nutshell, our tax authorities and the Minister of Finance have decreed that Maltese workers in Libya should pay minimum of 15% in Libya, and anything less than this amount, the Maltese government would claim the difference. In other words, if the new Libyan government in recognition of the hardships and dangers faced by foreign and local workers in the oil industry decides to lower the tax rate to such workers to less than 15% (as it has already applied to Libyan workers) then the Maltese government would intervene to claim its pound of flesh.
On the other hand, as a considerable number of Maltese workers pay as much as 25% income tax to the Libyan government they are logically entitled to 10% rebate/refund – unfortunately no such luck. What our defunct government fails to realise is that Maltese workers in Libya are an asset and benefit to the Maltese nation. The misfortunate workers sacrifice most of their lives (in most cases spending eight months of each year in Libya) deprived of their families, relatives and friends for lengthy periods of time, deprived of certain luxuries they are accustomed to whilst in their homes in Malta, and working in hazardous industrial locations (it is not the first time that a Maltese worker lost his life either during travelling overland in this vast country, in an air crash, or due to an industrial accident). The current situation in Libya is still being termed as fluid as some of our diplomats recently discovered when their vehicle was hijacked in Tripoli.
Ultimately, in spite of the risks, dangers and sacrifices endured by Maltese workers in Libya, they are an invaluable source of foreign income to the Maltese economy. They spend their hard-earned foreign currency in their home country (even though dedicating most of their time abroad), and yes, they do pay taxes in Malta – on every item purchased, or most services obtained, they pay that European invention called the VAT. They are not a financial burden to the Maltese society such as the thousands of mysterious consultants, or the ministerial honoraria of €500 a week self-awarded under the utmost secrecy (albeit presently suspended).
The dire consequences of this insidious agreement can be mainly twofold. Since our government does not have jurisdiction over companies not registered in Malta, oilfield companies which are registered and opened offices in Malta may decide to close shop and re-open elsewhere (e.g. Tunisia, Egypt, and/or in Libya itself) to avoid the bureaucracy involved of double taxation. This will result in a loss of income to Malta. On the other hand, Maltese workers employed in Libya might consider it not worthwhile to continue to do so if they are to be taxed by both countries (Libya and Malta).
They may opt to resign, in some cases claim unemployment benefits, and their jobs in Libya will be taken by other nationalities who do not have such absurd double taxation agreements with Libya, thereby depriving Malta of an invaluable source of foreign currency. It is amazing how our dictatorial government can continue to destroy the Islands’ economy in this manner having destroyed several public corporations (e.g. Air Malta, Sea Malta, etc.) and sold one of our major banks to a foreign entity on cheaper evaluation (Mid-Med Bank).
Raymond Sammut
Mellieħa